ARI (Arrium) : At Rock bottom, ore not?

[Snoopy]

Total capital expenditure for FY2015 is budgeted to be between $390m and $450m. This is incrementally $60m-$70m more than was spent in FY2014. The increment in cashflow expenditure needs to come out of my EBDA figure.

That leaves $324m - $334m in the money tin which can be put towards further repayment of debt should management desire.

As I said before. Arrium is generating plenty of cash and has no debt issues, even with current iron ore prices.

After reflecting over the weekend, I believe the detail my above analysis is not accurate.

'Capital Expenditure' is not an annual expense. An annual 'depreciation of asset expense' and 'amortization of mine licence exprense' will come out in the annual reported income statement, not the whole capital expenditure for the year. Effectively that means that all of the $390m and $450m projected Capex does need to come from my projected EBDA figure of $394m. That in turn means a small negative cashflow for the year. However, the negative cashflow of up to around $50m is not material on a balance sheet with $4.47billion of net assets and only $976m of net liabilities.

Arrium has plenty of cash. But while this kind of capex is spent annually, it is not the cash generating monster I had alluded to previously. Nevertheless, the bit about Arrium having no debt issues is still certainly true.

SNOOPY

[Snoopy]

A slight back pedal is in order here. The Arrium capital raising was in fact the maximum size they are allowed to do, without using other ASX provisions. I take that to mean they would have had to get a full independent analysts report on any new share (larger) rights offer, and give more notification time before rights started trading. IMO this would have been a good thing.

At next weeks AGM, Arrium are asking shareholders to vote to renew their authority for another quick and dirty small style (sic) cash issue like the one we have just had. I intend to vote against this motion. I think, given the state of the iron ore and steel industries, it is up to the Arrium directors to get an independent analysis of any future significant rights proposal. Voting against the directors quick and dirty alternative should achieve this.

Am I allowed to back pedal on a back pedal?

After listening to the recorded telecast of the AGM, the vote that shareholders were asked to vote on regarding giving the board free reign to issue more shares (up to 15% of existing capital) only applies in the future to shares the board wants to place with institutions, independently of who holds what in the current shareholding base. The outcome of the vote did not affect the ability of the board to declare a rights issue in the future. I note that there was considerable resistance, in particular from the Australian shareholder association, to allowing the board the option of placing 15% of the bumped up new capital with institutions in the future. Not enough resisance to defeat the motion though!

Consquently we can say that the company's bankers would have been consulted on the size of the rights issue and the recent capital raising has indeed 'right sized' the company, as I originally suggested.

SNOOPY

[Stranger_Danger]

Increased my holding nearly tenfold today, off a low base.

Have about 1/3 what I want. Near bottom? No idea.

[percy]

Increased my holding nearly tenfold today, off a low base.

Have about 1/3 what I want. Near bottom? No idea.

Gee Whiz.
That was some buying.
Pushed the share price up to 26.5 cents!!!! lol.

[Stranger_Danger]

lol I didn't buy above 26.

My base case is that this will still fall a little more, yesterdays move was in case we're at the bottom now. I do think we're close but that could be famous last words.

[Snoopy]

We have had the AGM and it produced no new surprises. In particular there was no specific mention of the company requiring further capital, although I did note the quick and dirty capital raising permission was renewed.

Latest information from 'shortman' is dated 10th November. Share price is 28c as I write this and the short position is now 2.3%. I will be interested to see what the post AGM short position re shorting is.

Post AGM information is now available on 'Shortman'. Monday (day of AGM) it was 2.33%. The next two days the number of shorted shares increased to 2.41% (Tuesday) and 2.57% (Wednesday).

The share price itself bounced nearly 10% yesterday, but is now back down to 26c. I want some more shares too but I'm going to watch for while. See what happens. Unlike shares that are likely to pay dividends, there is no hurry to purchase.

SNOOPY

[Joshuatree]

22.5c today. Horrible days for metals,Gold ,Oilers . M/S companies etc...... Also horrible if you are watching the falling knives and thinking shall i average down, for longtermers. or traders....G/luck from this non holder.

[percy]

Some buyers at 21.

[Snoopy]

Some buyers at 21.

Nope, buyers have retreated to 20c now. This is starting to look ridiculous, but Mr Market will go his own way.

Meanwhile Arrium have been busy paying down debt:

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REPURCHASE OF US$148M USPP NOTES
Arrium Limited (ASX:ARI) today announced that it has closed a partial tender offer to repurchase up to US$150 million of its US Private Placement Notes (USPP Notes) at par plus accrued interest. Take up ofthe offer was pleasing, with US$148 million USPP Notes being repurchased. The repurchase was funded by proceeds from the company’s recent capital raising.
No early redemption or make-whole costs were incurred with the repurchase. The repurchase is not expected to materially change the average interest rate for the company’s total drawn and undrawn debt facilities, which is currently approximately 4%. Arrium’s Chief Financial Officer, Mr Robert Bakewell said:

“The repurchase is in line with our focus on reducing debt and we are pleased with the take up of the offer.”

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SNOOPY

[winner69]

Now is the time to be brave Snoopy .....it'll all come right one day

Maybe a once in a lifetime to get an outfit like Arrium at a rock bottom price

Keep the faith